| NOTE 11:- | TAXES ON INCOME |
| a. | As of December 31, 2017, the U.S. Company had federal and state net operating loss carry forward for tax purposes of approximately $ 12,841. The federal operating loss can be offset against taxable income for 20 years. Utilization of the U.S. net operating losses may be subject to substantial limitations due to the change of ownership provisions of the Internal Revenue Code of 1986. | |
| b. | U.S. Tax Cuts and Jobs Acts:
On December 22, 2017, the U.S. Tax Cuts and Jobs Acts was enacted into law. The new legislation contains several key tax provisions that will impact the Company. Changes include, but are not limited to, a corporate tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017, a one-time repatriation tax on accumulated foreign earnings, a limitation on the tax deductibility of interest expense, an acceleration of business asset expensing, and a reduction in the amount of executive pay that could qualify as a tax deduction. The lower corporate income tax rate will require the Company to remeasure its U.S. deferred tax assets as well as reassess the realizability of its deferred tax assets. ASC 740 requires the Company to recognize the effect of the tax law changes in the period of enactment. However, the SEC staff has issued SAB 118 which will allow the Company to record provisional amounts during a measurement period.
The Company has concluded that a reasonable estimate could be developed for the effects of the tax reform. However, due to the short time frame between the enactment of the reform and the year end, its fundamental changes, the accounting complexity, and the expected ongoing guidance and accounting interpretations over the next 12 months, the Company considers the accounting of the deferred tax remeasurement and other items to be incomplete. These effects have been included in the consolidated financial statements for the year ended December 31, 2017 as provisional amounts, which had an immaterial effect on the taxes on income due to the valuation allowance.
During the measurement period, the Company might need to reflect adjustments to the provisional amounts upon obtaining, preparing, or analyzing additional information about facts and circumstances that existed as of the enactment date that, if known, would have affected the income tax effects initially reported as provisional amounts.
The measurement period will end when the Company obtains, prepares, and analyzes the information needed in order to complete the accounting requirements under ASC Topic 740 or on December 22, 2018, whichever is earlier. The Company expects to complete its analysis within the measurement period in accordance with SAB 118.
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| c. | Foreign tax: |
| 1. | Tax rates applicable to the income of the Israeli subsidiary: |
| The Israeli corporate tax rate in 2017 and 2016 is 24% and 25%, respectively. |
In December 2016, the Israeli Parliament approved the Economic Efficiency Law (Legislative Amendments for Applying the Economic Policy for the 2017 and 2018 Budget Years), 2016 which reduces the corporate income tax rate to 24% (instead of 25%) effective from January 1, 2017 and to 23% effective from January 1, 2018.
| 2. | The subsidiary has final tax assessments through 2012. |
| d. | Loss before taxes on income: |
| Year
ended December 31, |
|||||||||
| 2017 | 2016 | ||||||||
| Domestic | $ | 4,930 | $ | 2,738 | |||||
| Foreign | (3 | ) | (24 | ) | |||||
| $ | 4,927 | $ | 2,714 | ||||||
| e. | Deferred income taxes: |
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets are as follows:
| December 31, | ||||||||
| 2017 | 2016 | |||||||
| Deferred tax assets: | ||||||||
| Net operating loss carry forward | $ | 2,722 | $ | 3,894 | ||||
| Temporary differences | 35 | 34 | ||||||
| Deferred tax assets before valuation allowance | 2,757 | 3,928 | ||||||
| Valuation allowance | (2,757 | ) | (3,928 | ) | ||||
| Net deferred tax asset | $ | — | $ | — | ||||
In assessing the realization of deferred tax assets, management considers whether it is more likely than not that all or some portion of the deferred tax assets will not be realized.
The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences are deductible and net operating losses are utilized. Based on consideration of these factors, the Company recorded a full valuation allowance at December 31, 2017 and 2016.
| f. | Reconciliation of the theoretical tax expense to the actual tax expense: |
The main reconciling items between the statutory tax rate of the Company and the effective tax rate are the non-recognition of tax benefits from accumulated net operating loss carryforward among the Company and its subsidiary due to the uncertainty of the realization of such tax benefits.
| f. | A reconciliation of the beginning and ending balances of uncertain tax benefits is as follows: |
| December 31, | ||||||||
| 2017 | 2016 | |||||||
| Balance at beginning of the year | $ | 170 | $ | 97 | ||||
| Increases related to tax positions from prior years | 17 | 73 | ||||||
| Lapses of statutes of limitation | (19 | ) | — | |||||
| Balance at the end of the year | $ | 168 | $ | 170 | ||||
The Company recognizes interest and penalties related to unrecognized tax benefits in tax expense. During the year ended December 31, 2017, the Company accrued $15 for interest and penalties expenses related to uncertain tax positions.